Production Linked Incentive Scheme

Production Linked Incentive Scheme March 2022 home.kpmg/in

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Vision behind PLI Scheme

01 Atmanirbhar Bharat & Make in India

02 Focus on building manufacturing ecosystem in India

03 Aim to make India an export hub

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Attract investment in core competency areas

Help India be an integral part of global supply chain

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PLI Scheme Simple and direct incentives based on incremental sales

Focus on attracting large investments

Key features of PLI Schemes

Non-tariff measure to compete more effectively with cheap imports

Simplified application procedure

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Objectives & Expectations Objectives

Select few and make them torch bearers Identify sectors and products Unique evaluation - percentile Empowered bureaucracy Other benefits continue

Expectations • Incremental turnover: ~ USD 500 bn • Investment: USD 30 bn by FY25 • Global scale production facilities • Export promotion & import substitution • Align industrial development with global trends including ESG

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General parameters Sector specific Fixed Threshold Investment Incentive on Net Incremental Sales or cost reimbursement Requirement to meet the prescribed domestic value addition

Conditions regarding exports to be fulfilled, depending on scheme to scheme

Cumulative employment generation Manufacturing capacity & extent of integration Minimum Compound Annual Growth Rate (CAGR) in sales Specified category of products with minimum sales

* Please note, these are general parameters of a particular scheme and actual parameters vary from scheme to scheme © 2022 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

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Why evaluate PLI Total identified 14 sectors

Substantial incentive percentage

Adequate budgetary provision

Re-engineering supply chain

Competitor analysis – If not me someone else

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Status of PLI Schemes Large Scale Electronics Manufacturing Closed

Information Technology Hardware Closed

Food Processing Industry Closed

Automobiles & Auto Components

Manufacturing Of Medical Devices

Advance Chemistry Cell (ACC) Battery

Closed

Closed

Pharmaceuticals Drugs 2.0

Telecom & Networking Products

Closed

Closed

Closed

Textile Products: MMF Segment and Technical Textiles

Semi-conductors and display fabs

High Efficiency Solar PV Modules

Closed

Closed

Design-led manufacturing for augmenting infrastructure for 5G

Specialty Steel Open

Pharma 1.0 API/KSMs/DIs

Closed*

TBN

Drones and Drone Components

Open for specified APIs

White Goods (ACs & LED)

Open

* Likely to be re-opened © 2022 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, Open/Closed/TBN (To Be Notified)

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Open 7

Success of notified PLI schemes Resounding success of PLI schemes PLI schemes have been a huge success

Large no of applications received from various players

Significant investments committed by applicants

Augment production and raise direct employments

Selected Applicants of Key PLI schemes •

Large Scale Electronics Manufacturing: 16 applicants selected including Samsung, Foxconn, Pegatron, Lava, Micromax

•

Auto: 95 applicants selected for OEM Champion and Component scheme including Suzuki Motors, Mahindra, Maruti Suzuki

•

Pharmaceuticals: 55 applicants selected including Sun Pharmaceutical, Dr. Reddy’s Laboratories, Lupin

•

Food: Total 143 applicants selected including Britannia, Haldiram, ITC, HUL, Nestle, Dabur, Parag Milk Foods

•

IT Hardware: 14 applicants selected including Dell, ICT, Rising Stars, Lava, Dixon, Micromax

•

White Goods: 42 applicants selected including Daikin Airconditioning, Hindalco Industries, Havells India

© 2022 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

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Boost to Conventional and Unconventional players Conventional Players

Unconventional Players

» Samsung

» Axis Clean Mobility Private Limited

» Maruti Suzuki India Limited

» Booma Innovative Transport Solutions Private Limited

» Foxconn » Dell

» Elest Private Limited

» Britannia Industries Limited

» Hop Electric Manufacturing Private Limited

» Nestle India Limited

» Ola Electric Technologies Private Limited

» Cipla Limited

» Powerhaul Vehicle Private Limited

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Picture so far 01

Initial plan of the Government • PLIs announced for 13 sectors • Incentive earmarked INR 1.97 lakh crores or USD 26 bn

Actual Plan • Total PLI schemes announced till date: 13+1

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• Revised incentive earmarked: INR 2.92 lakh crores or USD 38.2 bn • Applicants selected: ~500 across PLI schemes • Investment committed by applicants: INR 3.86 lakh crores (includes committed and expected) • Range of incentives as a percentage of turnover: From 1%-50%

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Future plan • PLIs still open: Drones, Pharma 1.0, Steel, White Goods and Solar (additional outlay) • Scheme yet to be announced: Design led manufacturing for 5G • Sectors still to be tapped: Aerospace, Defence, R&D, capital goods etc. © 2022 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

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Thoughts for the road PLI to be looked in the context not in isolation •

Income tax rate – New manufacturing companies eligible for reduced rate of 15%

•

Removal of SEZ holidays – WTO impact

•

Phased manufacturing programmes – selective tariff incentives

•

State incentives, sectoral schemes by Central Government

Not a one-time programme •

Budget not exhausted

•

Government focus on capex in budget 2022

•

Need to align sector objectives with Government objectives

•

Focus not only on Centre, but also on States

Active interaction with Government is the key

© 2022 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

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Q&A

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